A comparative analysis of declining oil revenue implications on mono-economy budgetary objectives

  • Millicent Eze

Student thesis: Doctoral Thesis

Abstract

Crude oil is known as one of the most dynamically transacted commodities in today’s world, and as such, the global impact of the changes in oil price cannot be over-emphasised. Historically, these changes in oil price have been a constant phenomenon from the time when the oil price dropped substantially to its lowest level of $1.17 per barrel in 1946 to the period when oil price reached its peak of $145.31 per barrel in 2008. Although the magnitude of the effects differ across nations as oil serves as a crucial input to oil importers and a good source of revenue generation to oil exporters. Economically, both oil importers and exporters are dependent on oil, and as such, fluctuations in oil price affects both market sides. However, this study is a comparative analysis of declining oil revenue implications on mono-economy budgetary objectives, the case of Nigeria, Venezuela and Norway whose highest percentage of revenue emanates from oil. Recently, the oil industry has experienced a persistent decline in oil price, which has also led to the decline in oil revenues of most of the oil-exporting countries. The main concern is the ability of these nations to continue with their economic development aspirations in this new paradigm shift to oil revenue, necessitated by the decreasing oil price.

Methodologically, the study is based on dual methods of data sources, which involve both primary and secondary methods of data collection. The primary data analysis was mainly to supplement the secondary data analysis as it addresses one of the research questions. While the primary data were gathered using questionnaires and analysed with SPSS version 25, the ARDL estimation technique was employed for the empirical analysis using time series yearly data for 36 years (1981-2016).

The findings reveal that the government revenue of Nigeria, Venezuela and Norway dropped substantially for a percentage decrease in the oil price which indicates that the nations are overwhelmingly dependent on oil export as a major source of revenue. Contrary to expectation, the results also reveal that a percentage decline in oil price exerts a positive and significant effect on the government expenditures of Nigeria and Venezuela, financed mainly through borrowing. Norway serves as a reference to best practice as the results also reveal that Norway manages its resources effectively and not affected by the resource-curse syndrome. However, to improve the revenue base of the Nigerian and Venezuela economies, it is highly recommended that these nations diversify their revenue base, restore security which will attract foreign investors, develop the agricultural sector, which was the mainstay of the Nigerian economy before the discovery of oil, manage other natural resources efficiently and utilise government funds effectively. In addition, an economic model was developed for Nigeria and the Venezuelan economy, which would help in closing the revenue gaps in these oil-dependent nations.
Date of AwardOct 2019
Original languageEnglish
Awarding Institution
  • Abertay University
SponsorsTertiary Education Trust Fund (TETFUND)
SupervisorReza Kouhy (Supervisor) & Mo Yan (Supervisor)

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